Help - just received a '1042-S'
Discussion
Can anyone help me understand what this mean?
I live/work in the UK but own some US shares held by US brokers that I've earnt over the years working for US companies
Historically I've completed a W8-ben from time to time on request so I haven't had to pay tax when I've sold those shares - but this form is entitled 'Foreign Person's US Source Income subject to withholding'
Has my W8-ben expired? Have the rules changes? Was hoping to cash some of the shares in next month to help with a up coming Pistonhead related purchase - am I going to get less back than expected?
Any pointers gratefully received with all the usual caveats...
I live/work in the UK but own some US shares held by US brokers that I've earnt over the years working for US companies
Historically I've completed a W8-ben from time to time on request so I haven't had to pay tax when I've sold those shares - but this form is entitled 'Foreign Person's US Source Income subject to withholding'
Has my W8-ben expired? Have the rules changes? Was hoping to cash some of the shares in next month to help with a up coming Pistonhead related purchase - am I going to get less back than expected?
Any pointers gratefully received with all the usual caveats...
Usual disclaimer: I am merely a tax-sufferer, not a specialist in the Kafkaesque world of bilateral tax treaties.
I believe the 1042 is just a statement of US tax withheld. From your description of your setup, it is most likely relating to dividends paid by one of your shareholdings. Your W8 does expire every three years, so it's worth checking that your broker has a live one in force.
If it is a divi, and the W8 has been correctly recognised, you should have a US withhold of 15%. This can then be claimed in your UK return. If the W8 has been missed, it will be a withhold of 30% and you need to fight the IRS to get the 15% back. I don't think you can claim 30% in the UK because HMRC correctly say "yes they might have overcharged you but you can in theory get it back so we're only going to allow the treaty rate".
Have fun.
ETA: In the US a liquidity event for a corporate can be structured to be classed as a dividend, so you need to look at not just a classic EPS type annual dividend but also whether one of your holdings has undergone a stock repurchase or restructuring or capital distribution activity.
I believe the 1042 is just a statement of US tax withheld. From your description of your setup, it is most likely relating to dividends paid by one of your shareholdings. Your W8 does expire every three years, so it's worth checking that your broker has a live one in force.
If it is a divi, and the W8 has been correctly recognised, you should have a US withhold of 15%. This can then be claimed in your UK return. If the W8 has been missed, it will be a withhold of 30% and you need to fight the IRS to get the 15% back. I don't think you can claim 30% in the UK because HMRC correctly say "yes they might have overcharged you but you can in theory get it back so we're only going to allow the treaty rate".
Have fun.
ETA: In the US a liquidity event for a corporate can be structured to be classed as a dividend, so you need to look at not just a classic EPS type annual dividend but also whether one of your holdings has undergone a stock repurchase or restructuring or capital distribution activity.
Edited by Newc on Friday 16th March 13:33
Trikster,
I am in the same situation as you. For many years I've owned shares in a USA headquartered company and dividends arise in the USA. Thankfully, because of the double taxation agreement between the USA and UK, before the dividends are remitted to me in the UK withholding tax is deducted and retained in the USA. In order for the payments to be subject to withholding tax you need to submit a completed form W8-ben. Usually this is required every 3-4 years. There's very little information that you need to provide on this form.
The form 1042-S is a statement that's prepared annually by the agent paying the dividends and states the accumulated gross dividends and accumulated withholding tax per year.
When completing UK self assessment forms (the Foreign Section) you'll need to state, for the UK income tax year, the gross dividends you have received, and the total withheld tax you have had deducted. HMRC will calculate any UK tax due on the gross amount then take off the withheld tax that you have suffered, and then you owe HMRC the balance.
HMRC has never asked me for any copies of the forms W8-ben or 1042-S. Maybe they get the details under the reciprocal arrangement between HMRC and the USA IRS.
One thing always confusing is that the year for the 1042-S is always different to the UK tax year so the aggregate amounts for each yearly period never tie up.
What Newc says in his post above supports my experience too.
Hope this helps.
R.
I am in the same situation as you. For many years I've owned shares in a USA headquartered company and dividends arise in the USA. Thankfully, because of the double taxation agreement between the USA and UK, before the dividends are remitted to me in the UK withholding tax is deducted and retained in the USA. In order for the payments to be subject to withholding tax you need to submit a completed form W8-ben. Usually this is required every 3-4 years. There's very little information that you need to provide on this form.
The form 1042-S is a statement that's prepared annually by the agent paying the dividends and states the accumulated gross dividends and accumulated withholding tax per year.
When completing UK self assessment forms (the Foreign Section) you'll need to state, for the UK income tax year, the gross dividends you have received, and the total withheld tax you have had deducted. HMRC will calculate any UK tax due on the gross amount then take off the withheld tax that you have suffered, and then you owe HMRC the balance.
HMRC has never asked me for any copies of the forms W8-ben or 1042-S. Maybe they get the details under the reciprocal arrangement between HMRC and the USA IRS.
One thing always confusing is that the year for the 1042-S is always different to the UK tax year so the aggregate amounts for each yearly period never tie up.
What Newc says in his post above supports my experience too.
Hope this helps.
R.
Trikster,
You say that you've sold the shares of the USA company without any tax payment, due to the completion of the W8-ben. This form has nothing to do with the sale of the shares, it's all to do with the paying authority applying withholding tax at the lower rate of 15% from dividends.
Regarding the sale of the shares, you are liable for any UK Capital Gains Tax assuming that the shares have risen in value. Of course, the amount realised each UK tax year may be less than the CGT threshold, but you are still required to provide all the sale details when completing UK self assessment tax forms. If you are below the threshold HMRC will not trouble you, but if over you have tax to pay.
R.
You say that you've sold the shares of the USA company without any tax payment, due to the completion of the W8-ben. This form has nothing to do with the sale of the shares, it's all to do with the paying authority applying withholding tax at the lower rate of 15% from dividends.
Regarding the sale of the shares, you are liable for any UK Capital Gains Tax assuming that the shares have risen in value. Of course, the amount realised each UK tax year may be less than the CGT threshold, but you are still required to provide all the sale details when completing UK self assessment tax forms. If you are below the threshold HMRC will not trouble you, but if over you have tax to pay.
R.
Gassing Station | Finance | Top of Page | What's New | My Stuff